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Bruce Power carries on fight for higher power price

Bruce Power will continue to book revenue for its Bruce A nuclear station at above-market rates, despite missing a deadline

TransCanada is a major shareholder in Bruce Power, which operates the Bruce A and B nuclear stations near Kincardine.
TORONTO STAR FILE PHOTO

By John SpearsBusiness Reporter

Fri., July 27, 2012

Bruce Power is continuing to record revenue from its Bruce A nuclear plant at higher-than-market rates, despite missing a key deadline to secure the above-market rate, according to TransCanada Corp. officials.

TransCanada is a major shareholder in Bruce Power, which operates the Bruce A and B nuclear stations near Kincardine.

Each station has four units, and two of the Bruce A units are being returned to service after being idle since the late 1990s.

Bruce A has been receiving 6.8 cents a kilowatt hours for output from the two operating units, under a contract with the Ontario Power Authority (OPA.)

That’s much higher than the spot market rate, which has averaged about 2 cents a kilowatt hour this year.

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But under an agreement with the OPA, Bruce Power’s contract rate of 6.8 cents depended on returning the two idle units to service by July 1. Neither did.

One of the units was supposed to return to service in June, but an equipment failure has delayed the return until the fourth quarter. The other unit is due to start up in the third quarter.

Bruce Power has argued that it should continue receiving the higher- contract price under a “force majeure” clause in its contract, which says the company shouldn’t be held responsible for events beyond its control, such as political upheaval or extreme weather.

That application is still being considered.

“We are still doing our due diligence and no decision has been made,” the OPA’s Patricia Phillips said in an e-mail.

Alexander Pourbaix, president for energy and oil pipelines, said during the company’s second quarter earnings conference call that a decision may take some time.

“It’s obviously a pretty sensitive legal issue,” he said. “We believe there is ample justification for the force majeure claims.

“I think it might take a little bit of time to get through this issue,” he added.

Asked whether the company will be recording revenue from Bruce A since July 1 based on the contracted price or on the spot price, he replied:

“Based on the contracted price.”

The difference is significant. Bruce A’s output last year was 11 billion kwh. If the price were to drop from the contract price to this year’s spot market average, the difference in revenue over the course of a full year would be about $500 million.

Pourbaix also said TransCanada is continuing in arbitration with the Ontario government over the province’s decision to cancel a planned gas-fired generating plant in Oakville, which had been strongly opposed by local residents.

“At the same time our door is open and we continue to have discussions about other resolutions of the Oakville issue,” he said.

“Those options could include a replacement power plant,” he said.

He declined to discuss specifics, such as the possibility of re-locating the plant to the site of Ontario Power Generations’s coal-fired generating station in Nanticoke.

The province just agreed to pay $190 million in compensation to Eastern Power after cancelling another planned power plant by in Mississauga.

TransCanada reported profit of $272 million or 39 cents a share in the quarter, compared with $353 million or 50 cents a share. Revenue rose to $1.806 billion from $1.797 billion.

Pourbaix said the company continues to study converting part of its under-used mainline gas pipeline to carry oil.

“It is very technically feasible and we believe the resulting tolls from that project are very competitive with other competing projects,” he said.

“Depending on the demand we could configure it anywhere from about a 400,000 barrel a day pipeline up to a 900,000 barrel a day pipeline,” he said.

“We could build incremental pipeline anywhere from Montreal all the way to the Canadian east coast,” he said, depending on customer interest.

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